Automobile

Automobile Industry in India

Latest update: January, 2015

Passenger vehicle production in India

Passenger vehicles was the fastest growing segment, representing a CAGR of 12.9 per cent.

Passenger vehicle production in India

Market share of Indian automobile industry by volume

Two wheelers dominate production volumes; in FY13, the segment accounted for 77 per cent of the total automotive production in India.

Market share of Indian automobile industry by volume

Passenger vehicle exports from India

Passenger vehicle exports from India stood at 0.5 million duting FY13.

Passenger vehicle exports from India

FDI in Indian automobile industry

FDI inflows in the Indian automotives sector aggregated to US$ 9.6 billion during April 2000-February 2014.

FDI in Indian automobile industry

Updated: January, 2015

SECTORAL REPORT | October, 2014

Introduction

With the increasing growth in demand on back of rising income, expanding middle class and young population base, in addition to a large pool of skilled manpower and growing technology, will propel India to be among the world's top five auto-producers by 2015.

The automobile industry accounts for 22 per cent of the country's manufacturing gross domestic product (GDP). The auto sector is one of the biggest job creators, both directly and indirectly. It is estimated that every job created in an auto company leads to three to five indirect ancillary jobs.

India is expected to become a major automobile manufacturing hub and the third largest market for automobiles by 2020, according to a report published by Deloitte.

India is currently the seventh-largest automobiles producer in the world with an average annual production of 17.5 million vehicles, and is on way to become the fourth largest automotive market by volume, by 2015.

Market Size

The growth story for the Indian automobile industry in 2014 rode on the two-wheeler segment. The segment has clocked positive growth at 12.9 percent year-on-year to reach sales of nearly 13.5 million units by October 2014.

India's automobile sector has also picked up pace, with eight of the country's leading manufacturers' reporting combined passenger vehicle sales of 198,427 in November 2014, a 10 per cent annual rise. The rise in sales in November 2014 was led by Maruti Suzuki, whose sales increased 17 per cent to 100,024 units in the domestic market.

The commercial vehicles (CV) industry in India has registered an increase of 8.59 per cent in September 2014, as fleet owners have started to buy trucks in the anticipation of an improved economic activity.

The automobile sector in Andhra Pradesh has a potential for US$ 1 billion investment and US$ 1.50 billion output, according to a recent analysis by Automotive Components Manufacturers’ Association of India (ACMA) and city-based Andhra Chamber of Commerce and Industry Federation (ACCIF).

Investments

To match production with demand, many auto makers have started to invest heavily in various segments in the industry in the last few months. The industry has attracted FDI worth US$ 11,351.26 million during the period April 2000 to November 2014, according to the data released by Department of Industrial Policy and Promotion (DIPP).

Some of the major investments and developments in the automobile sector in India are as follows:

  • Snapdeal.com has entered into a partnership with Hero MotoCorp Ltd to sell two-wheelers and expect its online automobile sales to generate Rs 1,000 crore (US$ 162.33 million) of business in next six to 10 months.
  • Automotive supplier Uno Minda and Japan’s Toyoda Gosei Co Ltd have announced a joint venture (JV) partnership to manufacture and sell rubber hoses to automobile makers in India. The JV will be set up with a total investment of Rs 85.3 crore (US$ 13.84 million) in a phased manner.
  • Tafe Motors and Tractors Ltd (TAFE) has invested around US$ 140 million by way of equity in the US-based AGCO Corporation, a worldwide manufacturer and distributor of agricultural equipment.
  • Flipkart founders Mr Sachin Bansal and Mr Binny Bansal have led a US$ 1 million investment in Ather, an electric vehicle start-up focused on designing high-speed electric two-wheelers.
  • Harley Davidson Motor Co. has expanded their line up in India as it has launched three new models— the Breakout, Street Glide and CVO limited edition.
  • Hero Electric is looking for merger and acquisition (M&A) options or technology tie-ups to encourage its next generation electric vehicle technology.

Government Initiatives

The Government of India encourages foreign investment in the automobile sector and allows 100 per cent FDI under the automatic route. To boost manufacturing, the government had lowered excise duty on small cars, motorcycles, scooters and commercial vehicles to eight per cent from 12 per cent, on sports utility vehicles to 24 per cent from 30 per cent, on mid-segment cars to 20 per cent from 24 per cent and on large-segment cars to 24 per cent from 27 per cent.

Some of the major initiatives taken by the Government of India are:

  • The government’s decision to resolve VAT disputes has resulted in the top Indian auto makers namely, Volkswagen, Bajaj Auto, Mahindra & Mahindra and Tata Motors announcing an investment of around Rs 11,500 crore (US$ 1.86 billion) in Maharashtra.
  • The Automobile Mission Plan for the period 2006–2016, designed by the government is aimed at accelerating and sustaining growth in this sector. Also, the well-established Regulatory Framework under the Ministry of Shipping, Road Transport and Highways, plays a part in providing a boost to this sector.
  • The Government of India-appointed SIAM and Automotive Components Manufacturers Association (ACMA) are responsible in working for the development of the Indian automobile industry.
  • The government plans to come out with policies to introduce clean fuels such as biodiesel, bioethanol and electricity for public transport vehicles and school buses in big cities to tackle air pollution.
  • The Lok Sabha passed the Motor Vehicles Amendment Bill, 2014, paving the way for regularisation of e-rickshaws.
  • The government has set up National Automotive Testing and R&D Infrastructure Project (NATRiP) at a total cost of US$ 388.5 million to enable the industry to be on par with global standards.

Road Ahead

India is probably the most competitive country in the world for the automotive industry. It does not cover 100 per cent of technology or components required to make a car but it is giving a good 97 per cent, highlighted Mr Vicent Cobee, Corporate Vice-President, Nissan Motor’s Datsun.

The vision of AMP 2006-2016 sees India, “to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion; accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016.”

Exchange Rate Used: INR 1 = US$ 0.0162 as on January 21, 2015

References:Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP), Automotive Component Manufacturers Association of India (ACMA), Society of Indian Automobile Manufacturers (SIAM), Union Budget 2014-15

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

Posters

Brand India Pharma

REVVING UP

india is expected to become the third largest market for electric vehicles by 2025 at 2.5 million vehicles.

+ More >

Brand India Pharma

IBEF Publications

IBEF Publication

India Now Magazine


India Now Business and Economy

English

+ More Publications >

IBEF Publication

Perspectives More

Loading...
Loading blogs ...

ideas More

Ideas

Stay Connected with Gecko
Gecko is a multipurpose device that takes you a step closer to the Internet of Things, a world where everything is connected. Connovate Technology, its creator, has more such products up its sleeve.

JOIN IBEF.org

Join IBEF.org now. Enjoy FREE subscriptions downloads, updates and more.

Error

Already a member?
Login / Retrieve Password

Copyright © 2010-2015 India Brand Equity Foundation

All material, information, data, images or content on this website is subject to copyright or other applicable intellectual property laws and no part of it can be reproduced in any form (including paper or electronic form) without prior written consent and approval from IBEF. Infringements are subject to prosecution under the applicable laws. For consent related queries and conditions,
please write to info.brandindia@ibef.org

IndiaAn initiative of the Ministry of Commerce & Industry, Government of India